Transcript for audio podcast: Critical Access Hospital Designations

[Ann Maxwell] I'm Ann Maxwell, the Regional Inspector General in Chicago for our Office of Evaluation and Inspections, speaking with program analyst Brian Jordan. Let's talk about your recently released evaluation of Critical Access Hospitals. First, what are Critical Access Hospitals?

[Brian Jordan] Critical access hospitals are small hospitals located in rural communities designated as critical in providing access to health care. There are more than 1,300 of these hospitals across the country, in 45 states. In 2011, these hospitals received 8.5 billion dollars to care for more than 2 million rural Medicare patients.

[Ann Maxwell] Why would a hospital want to be designated as a critical access hospital?

[Brian Jordan] They receive higher Medicare reimbursements for most services compared to regular hospitals. In fact, they are paid 101 percent of their costs.

[Ann Maxwell] What makes a hospital, a 'critical access hospital?'

[Brian Jordan] The Centers for Medicare & Medicaid Services, or CMS, makes this designation based on many requirements. Our evaluation focused on two location requirements. First, these hospitals must be located a certain driving distance from other hospitals. Second, they must be located in rural areas.

[Ann Maxwell] Can you talk about a type of critical access hospital called a 'necessary provider?'

[Brian Jordan] Sure. Necessary providers don't need to meet the distance requirement. Up until 2006, States could designate hospitals as necessary providers. States can no longer do this, but all existing necessary providers have a permanent exemption from ever having to meet the distance requirement. Approximately 75 percent, nearly 1000 critical access hospitals are necessary providers.

[Brian Jordan] We were concerned that some of these hospitals may not be providing critical access to rural patients because they were located very close to other hospitals that could provide similar services. Remember, necessary provider hospitals never had to meet the distance requirement. And, until March of 2013, CMS never went back to check that other critical access hospitals still met the location requirements. With new hospitals being built and towns expanding, some of these hospitals might no longer qualify for critical access hospital status.

Since we pay these hospitals more to provide this critical access to rural patients, we wanted to know if these increased payments are tax dollars well spent.

[Ann Maxwell] What did you find?

[Brian Jordan] Almost two-thirds of existing critical access hospitals, over 800 of them, wouldn't have met the location requirements in 2011. Most of the hospitals that would not meet the requirements were necessary providers. More than 300 critical access hospitals were less than 15 miles from the closest hospital!

[Ann Maxwell] How much could Medicare and beneficiaries save if CMS dedesignated some of these hospitals?

[Brian Jordan] A lot of money! In 2011, Medicare and beneficiaries could have saved more than 1.3 million dollars for each dedesignated critical access hospital. By dedesignating critical access hospitals less than 15 miles from the nearest hospital, Medicare would have saved 449 million dollars.

[Ann Maxwell] Huge savings! So, what did you recommend?

[Brian Jordan] Because the designation means increased spending for both Medicare and beneficiaries, we recommend that CMS periodically check if each critical access hospital still provides services that rural beneficiaries can't easily get somewhere else, and therefore deserves the increased financial support from Medicare and beneficiaries. We also recommend that necessary providers be required to meet the distance requirement.

[Ann Maxwell] So if CMS followed your recommendations, would it result in two-thirds of all critical access hospitals being dedesignated?

[Brian Jordan] Not necessarily. These hospitals are costly for Medicare and beneficiaries, but we have to balance cost concerns with hospital access for rural beneficiaries. With that balance in mind, we recommend that CMS create alternative location related requirements for critical access hospitals that don't meet the distance or rural requirements. For example, CMS could allow critical access hospitals to keep their designations - if they serve communities with high poverty rates.

[Ann Maxwell] Thank you, Brian for sharing this important work on Critical Access Hospitals.